As traders await the release of U.S. inflation figures, a pullback in high-flying technology stocks is weighing on equity markets. Brent crude oil extended its gains for a third consecutive day, as a ceasefire in the Middle East appears increasingly fragile.
S&P 500 futures declined by 0.4%. Nasdaq 100 futures fell 0.9%, following a record-setting rally over the previous two sessions that was largely driven by semiconductor stocks.
European technology shares also underperformed, with the Stoxx 600 index dropping 0.8%. The index remains only about 4% below its record high set in late February. The UK's FTSE 100 fell 0.45%, while Germany's DAX and France's CAC 40 indices declined 0.7% and 0.5%, respectively.
The MSCI Asia Pacific ex-Japan index fell 0.6%. Even the seemingly unstoppable South Korean KOSPI index lost its momentum. The index retreated after approaching the 8,000 level, dropping about 3.5% and dragging down other regional markets. In South Korea, concerns over potential new taxes on AI-related profits impacted shares of Samsung Electronics and SK Hynix.
The Strait of Hormuz remains largely closed.
Technology stocks are taking a breather as concerns mount that an unprecedented rally has gone too far. The stalemate between the U.S. and Iran is also dampening market sentiment. After more than two months of conflict and failed diplomatic efforts, the Strait of Hormuz remains effectively shut. Brent crude rose 2.7% to above $107 per barrel.
Analysts at Saxo Bank stated, "Oil prices rose for a second day as the global oil market tightens, with limited prospects for the Strait of Hormuz reopening." Meanwhile, market attention turns to the U.S. Energy Information Administration's monthly outlook later Tuesday, and reports from the International Energy Agency and OPEC on Wednesday, for further clues on supply and demand forecasts.
Deutsche Bank strategist Jim Reid noted that Brent crude extended its previous day's gains as the U.S. and Iran appear no closer to breaking the negotiation deadlock. He said, "Markets are also pricing in an increased risk of prolonged disruption, with the 6-month Brent futures contract rising 2.54% yesterday to $89.50 per barrel."
Guillermo Hernandez Sampere, Head of Trading at MPPM, said, "Hopes for a resolution have been dashed, and any further recovery is on shaky ground. Markets need to reduce exposure to avoid over-investing at the wrong time."
Markets watch Trump's visit to China.
Investors are growing increasingly concerned that rising oil prices will further weigh on the global economy, while also awaiting a breakthrough in Middle East tensions.
Saira Malik of Nuveen Asset Management stated, "If the Strait of Hormuz remains closed for an extended period, and if inflation data becomes stickier as a result, potentially negatively impacting the strong economic growth we're seeing, then the market will pause its rally at that point." She added that currently, "the market assumes this will all end at some point."
Markets are closely watching President Trump's visit to China, which begins Wednesday. Expectations for progress on Iran or trade issues are low.
Daniel Casali, Chief Investment Strategist at Evelyn Partners, said, "Investors should not expect a comprehensive deal. A so-called 'victory' would mean no new tariffs or export controls, perhaps some symbolic smaller agreements like agricultural purchases, aircraft orders, or signals on rare earths." He added, "These may seem small, but marginal stability is important."
U.S. CPI data due today.
Despite the ongoing "no war, no peace" state between the U.S. and Iran, investors are increasingly focusing on economic data. As traders attempt to track a broad range of catalysts, the market expects the April U.S. CPI inflation reading to be hot, as the Iran conflict has pushed up gasoline and air travel prices.
The median estimate from a Bloomberg survey of economists forecasts a significant 0.6% month-over-month increase in the Consumer Price Index for April. The market anticipates the headline CPI to rise 3.7% year-over-year, higher than the previous month's 3.3% increase. Concerns over rising price pressures in the economy have prompted money markets to price out the possibility of a U.S. rate cut for the remainder of this year and to assign a significant likelihood of a hike by March 2027.
Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, wrote, "A stronger-than-expected print could reignite market expectations for a hawkish Fed, pushing yields higher and weighing on equity valuations; while a weaker-than-expected reading would provide relief, suggesting energy-driven inflation is being contained."
Any signs that the Federal Reserve may need to raise interest rates this year, rather than cut them as pre-war investors expected, could jolt markets.
A fierce selloff in UK government bonds.
Global bond yields have climbed, led by a selloff in UK gilts. This followed a speech by UK Prime Minister Keir Starmer on Monday, which failed to alleviate investor concerns about his political survival prospects after the Labour Party suffered heavy losses in local elections.
In early Tuesday trading, U.S. Treasury yields rose, though by less than in European and Asian bond markets. The yield on the two-year Treasury note increased by 2 basis points to 3.97%.
Florian Ielpo, Head of Macro at Lombard Odier Investment Managers, said this data "will determine whether bonds begin to ease pressure on risk assets or tighten the screws further." He added, "The last CPI print was largely energy-driven, so the key question today is whether this inflationary shock is spreading."
Ielpo stated that a softer reading could push yields lower, lead to a slight weakening of the dollar, and allow equity and credit markets to extend their gains. A stronger reading would have the opposite effect: higher long-term rates, a stronger dollar, and pressure on duration-sensitive sectors like technology stocks.
In the UK, investors sold government bonds as Prime Minister Keir Starmer resisted mounting pressure to step down. Yields on UK gilts rose across the curve by 11 basis points or more, with the 30-year yield touching 5.79%, its highest level since 1998. The British pound fell against all major currencies.
Bloomberg macro strategist Adam Linton said, "If the Bank of England hikes rates as much as the market is currently pricing, its negative impact on growth could contrast sharply with the U.S. and weigh on GBP/USD. Conversely, if concerns over UK growth prospects prompt a more cautious BoE approach, the pound could lose its rate advantage at the front end of the curve."
Sharp volatility in the Japanese Yen.
In the foreign exchange market, the U.S. dollar remained strong, on track for its largest two-day gain this month. The dollar rose 0.2% against the yen to 157.525. After meeting with Japanese Finance Minister Tsukasa Katayama in Tokyo, U.S. Treasury Secretary Scott Bessent stated on X that the U.S. and Japan maintain "ongoing and robust" coordination in addressing undesirable, excessive exchange rate volatility.
Gold prices fell as the fragile ceasefire between the U.S. and Iran cast a shadow over the outlook. In early European trading, New York gold futures declined 0.7% to $4,697.70. Analysts at ANZ Bank said, "The market seems caught between geopolitical anxiety and rising inflation concerns." Meanwhile, physical demand could also be at risk, as the Indian Prime Minister called on citizens to avoid buying gold for a year to protect foreign exchange reserves. Traders now await key U.S. inflation data, with CPI due later Tuesday and PPI on Wednesday.
'Big Short' Burry warns: Nasdaq's 'parabolic' rise resembles pre-internet bubble.
Investor Michael Burry, famous for the movie "The Big Short," has again warned that the Nasdaq 100 index is headed for a sharp reversal after a "parabolic" surge that has pushed technology stock valuations to unsustainable highs.
In a post, Burry likened current market conditions to the peak before the dot-com bubble burst, specifically pointing to the sharp rally in chip stocks, which has driven the Philadelphia Stock Exchange Semiconductor Index up nearly 70% since late March.
He stated that, in his estimation, the Nasdaq 100 trades at a price-to-earnings ratio of 43—far above an implied level of around 30—because "Wall Street may be overestimating earnings for our fastest-growing, highest-valued companies by more than 50%."
He said, "We are witnessing history. For the stock market, this is not a good thing," comparing it to "the scene at the crash site minutes before the horrific accident."
As the 'Big Short' calls for a crash, a prominent investor provides an 'AI bull market timeline': the bubble can inflate for another year.
According to Dan Niles, Founder and Portfolio Manager at Niles Investment Management, this AI-driven rally is far from over—it has at least another year to run before reaching a true peak.
He compared today's AI-driven market to the dot-com era but emphasized a key difference—this time, the growth is backed by strong fundamentals. This judgment is supported by data: Information Technology and Communication Services contributed 77% of the S&P 500's gains and 67% of Q1 earnings growth, and also contributed 55% of the quarter's real GDP growth.
S&P 500 earnings grew 28% in Q1, the highest since Q4 2021, with the Semiconductors & Semiconductor Equipment sector posting the highest growth at 99%.
Niles explained, "A bubble may already exist, but before it bursts, it can still inflate further."
The illusion of rate cuts ends! Goldman Sachs and Bank of America collectively reverse course.
Goldman Sachs and Bank of America are the latest Wall Street giants to join the "delayed rate cut forecast" camp. They argue that both employment and inflation data support the case for the Federal Reserve keeping rates on hold at least until the end of this year.
Michael Bave, Head of U.S. Economic Research at Bank of America, stated, "The data simply does not support a rate cut this year. Core inflation is currently too high and trending upward. The strong April jobs report was the final straw, especially considering the hawkish rhetoric from Fed officials."
Bave and his colleagues now expect the Fed will not cut rates again until July 2027, a significant shift from their previous forecast of September this year.
Following Friday's April non-farm payrolls data, the Goldman Sachs team also pushed back its forecast for the next Fed rate cut from September to December 2026.
Focus Stocks
Sportswear company Under Armour plunged 14% after reporting revenue of $1.17 billion and a loss per share of 3 cents. Analysts had expected a loss per share of 2 cents on revenue of $1.68 billion.
GameStop shares fell over 4%, and eBay edged slightly lower. eBay rejected GameStop's $56 billion acquisition offer on Tuesday.
Running shoe maker On Holding reported first-quarter profit and revenue that beat analyst estimates, but its shares still fell 5% in pre-market trading.
Wendy's surged over 23% on reports that Nelson Peltz's Trian Fund Management is raising capital for a plan to take the fast-food chain private.
Market intelligence platform ZoomInfo Technologies plummeted over 33% after lowering its full-year revenue guidance to a range of $1.185 billion to $1.205 billion.
Hydrogen energy supply company Plug Power rose over 7% after reporting an adjusted loss per share of 8 cents for the first quarter.
Telehealth company Hims & Hers Health issued weak profit guidance, sending its shares tumbling 14%.
Satellite development firm AST SpaceMobile reported a larger-than-expected first-quarter loss, and its stock fell 12%.
GitLab plunged 11% after CEO Bill Staples announced a major restructuring plan to pivot towards an agent AI strategy, involving layoffs, management streamlining, and scaling back overseas operations.
Webtoon Entertainment fell 10% after providing second-quarter revenue guidance of $332 million to $342 million, below the FactSet analyst consensus of $348 million.
Bitcoin mining and data center operator Cleanspark saw its stock drop 9% after reporting a second-quarter loss per share of $1.52, far worse than the analyst estimate of a 56-cent loss. Second-quarter revenue was $136.4 million, also below the expected $145.4 million.
Cryptocurrency mining firm Mara Holdings fell 4% after reporting a first-quarter loss per share of $3.31, higher than the market expectation of a $1.51 loss. Revenue was $174.6 million, missing the expected $181.9 million.
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